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Explorer ○

OKE anyone?

Was watching CNBC on Friday, and one of the guests on Halftime Report said that she contacted the company and that the company said that the dividend was safe. 

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19 Replies
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Follower ○○○

Re: OKE anyone?

Well maybe their dividend may be safe but little consolation to me considering I bought it at around $72 and have watched it tank to whatever it's at today, which is about $26.  Live and learn.

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Contributor ○

Re: OKE anyone?


@twinlabs wrote:

Was watching CNBC on Friday, and one of the guests on Halftime Report said that she contacted the company and that the company said that the dividend was safe. 


I do not know how energy companies operate but nobody at a public company other than the C suite (incl investor relations) is allowed to make such statements and that too are not allowed to make non-public statements.  It is possible the CNBC guest is paraphrasing a non-information into information.

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Follower ○○○

Re: OKE anyone?

I heard the same comment

 

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Participant ○○

Re: OKE anyone?

I've read analysts who say the dividend is safe.  That would be nice, as my cost basis is about $44.

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Contributor ○

Re: OKE anyone?

On the SA site, you can see the dividend history of OKE. The chart goes back to 1998. So over 20 years at this point. OKE has NEVER cut the dividend. They've kept it steady, but no cuts. This shows me that the company puts some stock and value into its dividend history. Maybe they want to get on the Dividend Challenger / Aristocrat list and be able to attract more stockholders. 

I don't know. But I will venture that a company that has navigated over 20 years of financial history should be able to navigate this virus crisis. Yes, the stock, along with other oil/gas stocks, dropped like a rock with the combination of the virus and Saudi / Russia market manipulation. And whether the stock can continue to grow in 2021 and beyond when a new administration could put a serious damper on oil/gas consumption, I don't know. 

 I got in initially at $60 a share, and rode it to over $70 with dividend reinvestment. I was lucky as I sold a two hundred shares in early March at $60 when the stock was coming off its highs. I bought 400 shares at $28, so that was a good move. It dropped my average cost per share to $43. So I'm still in the red, but I also have more shares. 

I know articles on SA are trumpeting the impending cut in the OKE dividend. My DD doesn't buy it. I could be wrong. I anticipate the announcement of the next dividend to come the week of the 25th. They announce near the end of July and pay middle of August. 

I realize the 14% yield does make it seem unreasonable to maintain. I guess we'll see who's right. 

 

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Participant ○○○

Re: OKE anyone?


@astrokng wrote:

....when a new administration could put a serious damper on oil/gas consumption, I don't know.....

 


Appreciate the confidence in new administration, but too early to be so confident - elections are not held yet.

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Contributor ○

Re: OKE anyone?

@SteadyEddy 

I hope there isn't a new administration. But if there IS one, I expect it would dampen the growth and prosperity in the oil/gas industry. 

I was trying to be politically neutral so as to not catch the wrath of the monitors. 

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Contributor ○

Re: OKE anyone?

Companies like RDS that have not cut dividends for half a century cut dividends after analysts claimed the company said dividend is safe.  Do not believe everything you hear on TV.  I do not own OKE.  I own MMP, CVX, XOM, and BP and I am not confident they will not cut dividends.  You are in an industry where you can not be confident.

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Explorer ○

Re: OKE anyone?

Point received. But I'm looking at it like this.....if they cut the divvy in half, a seven percent dividend isn't bad.

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Participant ○

Re: OKE anyone?

From Wells Fargo-

At this juncture, we have not made any adjustments to our model to reflect
a potential shutdown of the Dakota Access pipeline (DAPL). While we
continue to assume a dividend cut in our model, we are now
assuming a 30% cut versus our prior forecast of a 50% reduction
following OKE’s recent equity offering. Additionally, we have delayed
the timing of a cut to Q1’21 from Q2’20. To note, we believe a
potential shutdown of DAPL significantly increases the possibility of a
dividend cut. We project OKE’s leverage (rating agency) to
approximate 5.0x in 2021 after updating for the equity raise and our
revised dividend cut assumption.

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Contributor ○

Re: OKE anyone?

Which circles back to what I said about the elections in November.

Who knows what factors will be impacting life in the oil/gas industry come 2021. 

So there's a 14% yield for another six months. 

But if the election swings the balance of power, watch all sectors of the market to crash and dividends to be cut. It's going to be ugly. 

GLTA

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Frequent Contributor

Re: OKE anyone?

OKE, an energy transport/storage/dealer as well as a smattering of real estate, it generates about 85% of its revenue from commodity sales and about 15% from services. It will therefore be directly affected by energy commodity prices which as we know from others, has not been going very well.

OKE does have a good dividend growth history, going back through two recessions between 1999 and today (today's recession isn't really in the numbers yet)

OKE div hx.jpg

Although DG has slowed, this is an impressive history

OKE DGR.jpg

But then looking at the trend in company cash flows, its start looking not too good

OKE rev cffo.jpg

Sales have been on a constant decline since 2Q17, which pretty much tracks the prices of LNG and cude oil

oke cffo div.jpg

What is impressive is OKE's ability to sustain their operational cash flows despite the declines in revenue. Have no idea how they are doing this, but they continue to cover their dividend pretty well in the mid 70% range for the past 4Q.

The 6% dilution with a recent stock offering will increase this payout ratio unless sales rise. Probably the most worrisome is their trending in a reducing % of investment expenses being paid for with operational cash after the dividend

OKE CFFI paid with cffo.jpg

This is not good.

Looking at the CF Trending, it would seem OKE management has done a good job of reducing overhead and optimizing interest expensing (graph not shown), but there's only so much of that they can do. Ultimately, they've got to generate the revenue, and right now, that trend per share is looking like it will only get worse.

A dividend cut is likely, just not sure when. But even with a 30% to 40% cut, that would bring the annual dividend down to about a 9.77% to 8.38% current yield at Friday's closing price.

Of course, the other concern here is more strategic. If there is a turn over of majority in the House and Senate and WH, the headwinds could really start blowing. Such winds will be shielded somewhat by the number of RVs, Pick Ups and SUVs purchased in the last couple of years and the demand they create thus the political unpopularity of anything happening quickly to energy supply....although like tobacco, this industry is likely not going to enjoy the growth they once did and sustaining themselves will likely become more difficult.

So is OKE worth the current $26.72 price? If income is your primary objective and longer term capital appreciation isn't, but reducing the dividend by 30% to 50% with minimal growth over the next 10 years, and the certain demand for energy, at perhaps declining levels over the next 10 - 20 years, you could do worse than OKE.

BruceM

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Contributor ○

Re: OKE anyone?

Low interest rates have distorted everything, including what is a sustainable debt to equity level.  The strangest thing is when Analysts review leverage, they seem to be content if the management can show their ability to refinance the debt.  Ability to refinance is not the same as ability to repay, especially when debt is securitized to public holders.  

How many companies in the oil patch can actually pay when debts become due without refinancing?

Without availability of public markets to securitize loans, would banks lend the same amount of money to these companies?   So, now solvency is directly linked to liquidity and not necessarily to viability of business models.

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Participant ○

Re: OKE anyone?

Great post Anitya.

One has to ask those same questions about a lot of companies especially these days with the low rates you mention. Heard of Zombie companies?

Oil and gas stocks have had some pretty wild volatility for a number of years now and no sign of that ending soon. Not that many years ago (1998) when oil was trading around $18 if you told your banker that it was going to go to $150 in 2008 and back to $18 in 2020 would he loan you $800m? And keep rolling it over when it came due? Apparently so, as long as you show the ability to make the payments.

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Participant ○

Re: OKE anyone?

As far as OKE, I sold my 400sh of OKS on 3/3/17 for $53.44 prior to the OKE change, paid the tax(same as everyone else) and almost bought it back at $60 but didn't. I did miss out on about $5k in dividends since and it is somewhat interesting again now at around $27 even if they do cut by 50%.

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Contributor ○

Re: OKE anyone?

Great job, Bruce. 

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Participant ○○

Re: OKE anyone?

I would look at buying more at $25 share, but I would figure on a cut from ,935 div. to .35 div. and then pray for a hard winter! :)

Copie

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Participant ○○

Re: OKE anyone?

6/22/2020:  ONEOK (NYSE:OKE) declares $0.935/share quarterly dividend, in line with previous.

Forward yield 12.68%

Payable Aug. 14; for shareholders of record Aug. 3; ex-div July 31.

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Contributor ○

Re: OKE anyone?

As I said two weeks ago on this thread, didn't expect a dividend cut. 

In line with previous. 

13% yield. 

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